In the path of industry development, besides the overall technology improving, the resources reallocation among firms within industry, due to the turnover of firms driven by the market mechanism, is probably the major force of productivity increase for an industry. Provided that firms within an industry are heterogeneous in production efficiency, the market tends to force the inefficient firms to leave and the efficient firms to enter. This phenomenon of firms’ turnover will change the market share between the efficient and inefficient firms. As a result, the overall productivity level of the underlying industry will change accordingly. In this research, we will use the Taiwanese Manufacturing Census data of 1981, 1991 and 1996 to establish a panel data of firm level. Then, the dynamics of the turnovers for Taiwanese manufacturing sectors will be explored. Furthermore, we will scrutinize the linkage between the turnover and the firm-level productivity, and in turn analyze the turnover-induced resource reallocation effect to compute its contribution to the total factor productivity (TFP) for the whole manufacturing industry. Keywords: Firm Turnover、Resources Reallocation、Total Factor Productivity (TFP)
